Background and Context
The petitioner, a private limited company engaged in works contracts, challenged an Order-in-Original dated 4 July 2024 and related show-cause notices and rectification rejection issued by the Commissioner, GST and Central Excise, Rourkela. The impugned orders pertained to service tax demands for the financial years 2015-16 and 2016-17 under the Finance Act, 1994. The petitioner argued that it had not executed any works in Odisha prior to the introduction of GST and that its turnover was exempt under the Mega Exemption Notification No. 25/2012-ST. The company further contended that the demand was arbitrary, as it was based solely on information from the Income Tax Department without independent inquiry or proper service of notice.
Submissions and Proceedings
The petitioner asserted that the Commissioner lacked jurisdiction to levy service tax on turnover not attributable to Odisha and that the demand was raised without any work being executed in the state prior to 1 July 2017. The respondent authority maintained that the proceedings were initiated based on data from the Central Board of Direct Taxes and that the petitioner failed to respond to requests for documents, necessitating quantification of tax liability on available records.
The Court noted that the petitioner had not availed alternative remedies but entertained the writ petition due to alleged violations of natural justice, including non-service of one of the show-cause notices and inadequate opportunity to present its case.
Court’s Reasoning and Findings
Upon review, the Court found that the adjudicating authority had not conducted an independent inquiry to determine whether the amounts treated as consideration for service tax were related to works executed within Odisha. The authority relied solely on information from the Income Tax Department and did not verify the actual situs of the services. The Court held that this failure rendered the findings against the petitioner perverse.
The Court also took note of subsequent developments, including orders by the Principal Commissioner, Central Goods and Services Tax and Central Excise, Ranchi, and the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which had either dropped or set aside similar demands for overlapping periods on grounds of double taxation and limitation.
It was further observed that the petitioner had not been given a proper opportunity to present evidence or claim exemption under the relevant notification, nor to raise the issue of limitation. The Court cited the Supreme Court’s decision in Tin Box Co. v. CIT, emphasizing the necessity of providing a reasonable opportunity of hearing before passing an adverse order.
Decision and Directions
In light of these findings, the Orissa High Court set aside the Order-in-Original dated 4 July 2024 and the rectification rejection dated 23 June 2025. The Court directed that the petitioner be given one opportunity to present all relevant documents and evidence before the adjudicating authority in Odisha. The authority is to conduct a fresh adjudication, allowing the petitioner to demonstrate, among other things, whether the demand would result in double taxation, whether the turnover qualifies for exemption, and whether the proceedings are barred by limitation.
The petitioner is required to appear before the authority on or before 6 April 2026, and the entire adjudication process is to be completed within six weeks of receipt of the Court’s order. The Court emphasized that unnecessary adjournments should be avoided and that the petitioner must cooperate fully.
With these directions, the writ petition was disposed of, with no order as to costs.
Case Reported at:
Case Name: Saryug Gautam Construction Pvt. Ltd. v. Commissioner Central Goods and Service Tax & Central Excise Commissionerate and Ors.
Case Citation: (2026) taxcode.in 721 HC
